DOES GOLD ACT AS A HEDGE OR A SAFE HAVEN FOR EMERGING STOCK MARKETS IN ASIA?

Abstract

Many people believe that gold is an essential asset in investors' portfolios. It is said to be a hedge, a diversifier, or a safe haven for financial investment because of its negative correlation with the stock market. There is an argument that this characteristic is only applied for the developed stock market, not the emerging stock market. This research aims to examine this controversy, mainly focus on Asia's stock market environment during the 2008-2020 period, following Econometric Model, and using the GARCH (1,1) model and Maximum Likelihood estimation. Additionally, this paper classifies weak or strong qualities of gold as a hedge or a haven. The paper shows that gold loses its safe-haven figure in the emerging stock market. Specifically, I conduct research in five stock markets - Korea, India, Thailand, Taiwan, and Emerging Market, only Korean investors consider gold as a strong hedge and safe haven method. The others have no response.